India Ratings and Research (Ind-Ra) has placed Hella Infra Market\r\nPrivate Limited’s (Hella) Long-Term Issuer Rating of ‘IND A’ on Rating\r\nWatch Negative (RWN). The Outlook was Stable. The instrument-wise rating\r\nactions are as follows:
Analytical Approach: Ind-Ra\r\ncontinues to take a consolidated view of Hella and its wholly-owned\r\nsubsidiaries, Hella Infra Market Retail Private Limited, Hella Chemical Market\r\nPrivate Limited and Trinitymaterial Market Place Pvt Ltd, as the companies\r\noperate in the same line of business and there are strong operational and\r\nstrategic linkages among them.
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The RWN follows Hella's ongoing proceedings\r\nwith the income tax (IT) department, post a search conducted by the department\r\nbetween 9 March 2022- 12 March 2022 on the premises of the company and the residences\r\nof its co-founders, which was first reported in the media on 17 March 2022.
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The management has informed the agency that\r\nthe search was related to some unpaid goods and services tax-related expenses\r\nby some of its suppliers and significant foreign funding received at increasing\r\nvaluations.
Ind-Ra understands from the management that\r\ncash of INR1.9 million was seized from one of the co-founder’s residence, and\r\nthere were no other unaccounted cash/assets at any of Hella’s premises.\r\nHowever, some books of accounts and documents from Hella’s premises were taken by\r\nthe IT department for further scrutiny.
One of the key observations of the IT\r\ndepartment includes the company's foreign funding at high premiums. With the\r\ncompletion of Series D funding in August 2021, Hella has successfully raised\r\nfour rounds of equity of about INR20 billion over FY20-FY22 to aid its\r\ncontinued growth. The investors include reputed fund houses such as\r\nAccel via Accel India V (Mauritius) Limited, Tiger Global (via a\r\nSingapore-based investment affiliate Internet Fund V Pte Ltd), Nexus Ventures\r\nPartners and Evolvence Group, a Dubai-based investment firm (via Evolvence\r\nIndia Fund III Limited). Hella’s board comprises three nominees from the\r\nprivate equity investors (in addition to the two co-founders), who provide\r\nstrategic guidance and operational oversight.
Furthermore, certain expenses amounting to\r\nINR2.2 billion are under the scanner owing to some goods and services\r\ntax-related mismatches. The management has stated that the\r\npurchases under question are genuine and they have submitted\r\ncorresponding documents to the authority to support the same; the co-founders\r\nhave consented to pay any tax liability that arises in the event of a mismatch.\r\nThe IT department has also indicated that it has unearthed evidence\r\nof a network of some Mumbai and Thane-based shell companies, but the management\r\nhas stated that this issue is not linked to Hella or the promoters. The\r\nmanagement has also mentioned that the matter is under consideration with the IT\r\ndepartment and the company has extended full co-operation to the department. The\r\nagency continues to monitor the developments closely to assess the impact of\r\nthe aforesaid claims, crystallisation of tax liability if any, any further\r\nobservations of the IT department or adverse developments against the company\r\nas well as its ability to manage liquidity and operational performance during\r\nthe period.
Liquidity Indicator - Adequate: As on 22 March 2022, the company had gross debt of INR12\r\nbillion and free cash and cash equivalents of INR2.5 billion in addition to\r\nundrawn working capital lines and encumbered fixed deposits of INR2.5 billion\r\neach, against which the company’s debt service obligations are likely to be\r\naround INR1.5 billion over the next six months (FY23: around INR3.5 billion).\r\nThe outstanding net debt is 2.1x of the company's annualised 10MFY22 EBITDA,\r\nwithin Ind-Ra's negative sensitivity of 2.5x.
The management has informed Ind-Ra that\r\ndiscussions are going on with respect to the planned Series E funding round,\r\nwith likely completion by 1HFY23, factoring in a delay of a few\r\nmonths. The infusion, which could see participation from some existing and a\r\nfew new investors, would significantly boost the company’s liquidity once received.\r\nHowever, the management has mentioned that in case of a further delay in\r\nthe private equity infusion, the company could scale down the growth rate,\r\nwhich would restrict the working capital outflow, thereby conserving liquidity.\r\nFurthermore, the management has indicated that their existing equity investors\r\nhave agreed to infuse fresh capital to support the company’s business\r\nrequirements. Hella expects to receive the first tranche of the equity round of\r\nUSD10 million within the next 15-20 days. According to the management, if there\r\nare any further equity requirements in the future, the investors have committed\r\nto infuse additional funds into the company.
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Continued Strong Operational Performance: Hella’s monthly revenue run rate has been consistently increasing. The\r\ncompany’s consolidated revenue increased to around INR46.7 billion during\r\n10MFY22 (10MFY21: INR7.7 billion, FY21: INR12.4 billion), led by an expansion\r\nof the product portfolio across various construction materials along with\r\ngeographical expansion. The company’s consolidated EBITDA margins increased to 5.8%\r\nduring 10MFY22 (10MFY21: 4.3%, FY21: 5.2%), supported by the increased revenue\r\ncontribution of high-margin products such as chemicals and admixtures and own\r\nbranded products.
The RWN indicates that the ratings may be affirmed or\r\ndowngraded upon resolution. Ind-Ra will resolve the RWN upon\r\nachieving clarity on the impact of the search by the IT department on the\r\nbusiness, governance and financial profile of Hella.
Incorporated in 2016, Hella is promoted by\r\nSouvik Pulakesh Sengupta and Aaditya Gajendra Sharda. It supplies a\r\ncomprehensive range of construction materials, including ready-mix concrete,\r\naggregate, fly-ash, paints, construction chemicals, steel and cement. The\r\ncompany’s business model includes cloud manufacturing, catering to\r\nbusiness-to-business clients, and direct retailing of its own contract\r\nmanufactured products and other branded products. Hella provides contract\r\nmanufacturing through non-branded manufacturers under INFRA.MARKET brand by\r\nutilising the idle capacity of various plants in India. It also has\r\ndistributors for various branded manufacturers and manages the supply chain.\r\nThe company has expanded its product portfolio to include tiles, paints, pipes, etc. during FY22.
HELLA CONSOLIDATED FINANCIAL PROFILE
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| \r\n Parameters (INR million) | \r\n \r\n 10MFY22 | \r\n \r\n FY21 | \r\n \r\n FY20 | \r\n
| \r\n Revenue | \r\n \r\n 46,685 | \r\n \r\n 12,429 | \r\n \r\n 3,508 | \r\n
| \r\n EBITDA | \r\n \r\n 2,706 | \r\n \r\n 641 | \r\n \r\n 123 | \r\n
| \r\n EBITDA margins (%) | \r\n \r\n 5.8 | \r\n \r\n 5.2 | \r\n \r\n 3.5 | \r\n
| \r\n Net leverage (x) | \r\n \r\n 2.6# | \r\n \r\n -2.0 | \r\n \r\n -1.7 | \r\n
| \r\n Net interest\r\n coverage (x) | \r\n \r\n 2.6 | \r\n \r\n 5.0 | \r\n \r\n 10.7 | \r\n
| \r\n Source: Hella,\r\n Ind-Ra # annualised | \r\n
Additional information is available at www.indiaratings.co.in. The ratings above were solicited by, or on behalf of, the issuer, and therefore, India Ratings has been compensated for the provision of the ratings.
Ratings are not a recommendation or suggestion, directly or indirectly, to you or any other person, to buy, sell, make or hold any investment, loan or security or to undertake any investment strategy with respect to any investment, loan or security or any issuer.
","participationDisclosures":null,"disclaimer":"ALL CREDIT RATINGS ASSIGNED BY INDIA RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTPS://WWW.INDIARATINGS.CO.IN/RATING-DEFINITIONS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE WWW.INDIARATINGS.CO.IN. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. INDIA RATINGS’ CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE.
","metaTags":"placed on RWN","effectiveDate":"Mar 28, 2022 | Hella Infra Market Limited (Formerly Hella Infra Market Private Limited)","effectiveDateTime":"0001-01-01T00:00:00","dateOfCreation":"Mar 28, 2022","isDeleted":false,"isMigratedData":false,"viewCount":1896,"facebookShareCount":0,"linkedInShareCount":0,"googlePlusShareCount":0,"twitterShareCount":0,"ratingCriteriaReportsIDs":"5,8,10","pressReleaseStatus":"Publish","activity":"Created By UserID: 65896","lastActivityDate":"3/28/2022 9:30:18 AM","currentRatings":"| \r\n Instrument Type | \r\n \r\n Date of Issuance | \r\n \r\n Coupon Rate | \r\n \r\n Maturity Date | \r\n \r\n Size of Issue (million) | \r\n \r\n Rating/Rating Watch | \r\n \r\n Rating Action | \r\n
| \r\n Working capital facility | \r\n \r\n - | \r\n \r\n - | \r\n \r\n - | \r\n \r\n INR7,500 | \r\n \r\n IND A/RWN/IND A1/RWN | \r\n \r\n Placed on RWN | \r\n
| \r\n Non-convertible debentures (NCDs)# | \r\n \r\n - | \r\n \r\n - | \r\n \r\n - | \r\n \r\n INR7,570 | \r\n \r\n IND A/RWN | \r\n \r\n Assigned and placed on\r\n RWN | \r\n
| \r\n Proposed long term debt ^ | \r\n \r\n - | \r\n \r\n - | \r\n \r\n - | \r\n \r\n INR4,430 (reduced from INR12,000) | \r\n \r\n IND A/RWN | \r\n \r\n Placed on RWN | \r\n
# Details in annexure
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^ The proposed long-term debt may be issued as\r\nterm loans/non-convertible debentures.
| \r\n Instrument\r\n Type | \r\n \r\n Current\r\n Rating/Rating Watch | \r\n \r\n Historical\r\n Rating/ Rating Watch/Outlook | \r\n |||||
| \r\n Rating Type | \r\n \r\n Rated Limits\r\n (million) | \r\n \r\n Rating | \r\n \r\n 23 December\r\n 2021 | \r\n \r\n 11 October 2021 | \r\n \r\n 10 May 2021 | \r\n \r\n 4 February 2021 | \r\n |
| \r\n Issuer rating | \r\n \r\n Long-term | \r\n \r\n - | \r\n \r\n IND A/RWN | \r\n \r\n IND A/Stable | \r\n \r\n IND A-/RWE | \r\n \r\n IND A-/Stable | \r\n \r\n IND\r\n BBB+/Positive | \r\n
| \r\n Working\r\n capital facility | \r\n \r\n Long-term/short-term | \r\n \r\n INR7,500 | \r\n \r\n IND A/RWN/IND\r\n A1/RWN | \r\n \r\n IND\r\n A-/Stable/IND A1 | \r\n \r\n IND\r\n A-/RWE/IND A1/RWE | \r\n \r\n IND\r\n A-/Stable/IND A1 | \r\n \r\n IND\r\n BBB+/Positive/IND A2+ | \r\n
| \r\n NCDs | \r\n \r\n Long-term | \r\n \r\n INR7,570 | \r\n \r\n IND A/RWN | \r\n \r\n - | \r\n \r\n - | \r\n \r\n - | \r\n \r\n - | \r\n
| \r\n Proposed Long\r\n term debt | \r\n \r\n Long-term | \r\n \r\n INR4,430 | \r\n \r\n IND A/RWN | \r\n \r\n IND A/Stable | \r\n \r\n - | \r\n \r\n - | \r\n \r\n - | \r\n
| \r\n ISIN | \r\n \r\n Date of Issuance | \r\n \r\n Coupon Rate (%) | \r\n \r\n Maturity Date | \r\n \r\n Size of Issue (million) | \r\n \r\n Rating/Rating Watch | \r\n
| \r\n INE06E507041 | \r\n \r\n 24 December 2021 | \r\n \r\n 13.0 | \r\n \r\n 24 December 2024 | \r\n \r\n INR4,000 | \r\n \r\n IND A/RWN | \r\n
| \r\n INE06E507058 | \r\n \r\n 25 January 2022 | \r\n \r\n 11.75 | \r\n \r\n 25 January 2025 | \r\n \r\n INR2,250 | \r\n \r\n IND A/RWN | \r\n
| \r\n INE06E507066 | \r\n \r\n 22 February 2022 | \r\n \r\n 11.0 | \r\n \r\n 22 August 2024 | \r\n \r\n INR1,320 | \r\n \r\n IND A/RWN | \r\n
| \r\n Instrument\r\n Type\r\n | \r\n \r\n\r\n Complexity\r\n Indicator\r\n | \r\n \r\n
|---|---|
| \r\n Working\r\n capital facility\r\n | \r\n \r\n\r\n Low\r\n | \r\n \r\n
| \r\n NCDs\r\n | \r\n \r\n\r\n Low\r\n | \r\n \r\n
| \r\n Proposed\r\n Long term debt\r\n | \r\n \r\n\r\n Low\r\n | \r\n \r\n
India Ratings and Research (Ind-Ra) is India's SEBI registered credit rating agency committed to providing India's credit markets accurate, timely, and prospective credit opinions. Built on a foundation of independent thinking, rigorous analytics, and an open and balanced approach towards credit research, Ind-Ra has grown rapidly during the past decade, gaining significant market presence in India's fixed income market.
\r\nInd-Ra currently maintains coverage of corporate issuers, financial institutions (including banks and insurance companies), finance companies, urban local bodies, and structured finance and project finance companies.
\r\nHeadquartered in Mumbai, Ind-Ra has seven branch offices located in Ahmedabad, Bengaluru, Chennai, Gurugram, Hyderabad, Kolkata, and Pune. Ind-Ra is recognised by the Securities and Exchange Board of India and the Reserve Bank of India.
\r\nInd-Ra is a 100% owned subsidiary of the Fitch Group.
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